Dali Foods : SECOND CLARIFICATION ANNOUNCEMENT

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Dali Foods Group Company Limited

達利食品集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 3799) SECOND CLARIFICATION ANNOUNCEMENT

Reference is made to (1) the clarification announcement (the "Clarification Announcement") of Dali Foods Group Company Limited (the "Company", and together with its subsidiaries, the "Group") dated 8 June 2017 relating to the allegations and comments concerning the Group published by FG Alpha Management through its Twitter account (the "Allegations") on 7 June 2017; and (2) a full version of the presentation slides on the Allegations (the "Slides") released under the name of Dan David, co-founder of GeoInvesting and founder of FG Alpha Management, which were posted on the website of GeoInvesting.

Subsequent to the Company's release of the Clarification Announcement, it has been brought to the attention of the board of directors of the Company (the "Board") that a full version of the Slides were posted on the website of GeoInvesting. Having reviewed the Slides, the Board wishes to provide a further update to the shareholders and potential investors of the Company regarding the Board's views on one of the five allegations made by FG Alpha Management, which relates to inconsistent tax filings, as there are new details about it in the Slides. As for the other allegations, the Board believes that the explanations and clarifications previously provided by the Company in the Clarification Announcement were sufficent and no further explanations are required.

In the new details about the allegation relating to inconsistent tax filings that came to the attention of the Board today, FG Alpha Management claims that the total amount of tax paid by Fujian Dali for 2015, as filed with the State Administration for Industry and Commerce ("SAIC"), was RMB50.48 million, while the minimum amount of tax payment for inclusion in the list of "Top 100 Taxpayers in Fujian

province" was RMB271 million for 2015. As Fujian Dali was ranked 81st in that list, FG Alpha Management claims that the total amount of tax paid by Fujian Dali to the State Administration of Taxation ("SAT") must have exceeded RMB271 million. Therefore, FG Alpha Management alleges that there are inconsistencies between the Group's tax filings with the SAT and the SAIC. In addition, FG Alpha Management points out that the Group has at least three subsidiaries in Fujian province that are listed in the Fujian Key National Tax Source Enterprise List, including Fujian Dali, Dali PRC and Quanzhou Dali.

The Company hereby clarifies as follows:

1. Fujian Dali, Dali PRC and Quanzhou Dali ("Quanzhou Dali Foods Co., Ltd.") and their predecessors had cross shareholding relationships, i.e. Fujian Dali was a 100% shareholder of the predecessor of Dali PRC (namely Hui'an Packaging) and Quanzhou Dali. In November 2014, the Company acquired Hui'an Packaging from Fujian Dali and renamed it Dali PRC. Between November and December 2014, Dali PRC acquired from Fujian Dali a number of companies, including Quanzhou Dali. The aforesaid transactions were part of the reorganization of the Group prior to its initial public offering. Please refer to the section headed "History, Development and Reorganization" of the prospectus for details. Since the completion of the Group's reorganization, Fujian Dali has not engaged in any business related to food and beverages, nor does it have any material production operations.

2. The Company confirms that the tax payment amounts of Dali PRC, Fujian Dali and Quanzhou Dali for 2015 were RMB345 million, 50 million and 85 million, respectively, and the tax payment amounts they each registered with the SAIC and the SAT for 2015 were consistent and match the above amounts. The current tax registration numbers of Dali PRC, Fujian Dali, and Quanzhou Dali are 91350000611541826X, 91350521611536808M, and 913505216115415277, respectively. The previous tax registration numbers of Dali PRC, Fujian Dali, and Quanzhou Dali were 350521611541826, 350521611536808, and 350521611541527, respectively, which are no longer in use after the consolidation of the business license, institution code certificate and tax registration certificate.

In the Slides, FG Alpha Management quoted the right tax amounts but they were attributed to the wrong entities. The entity that was included in the list of "Top 100 Taxpayers in Fujian province" for 2015 should have been Dali PRC instead of Fujian Dali. The reason for this error was that the tax agency mixed up Dali PRC and Fujian Dali in compiling the rankings.

Taken together, FG Alpha Management's allegation that there existed inconsistencies between Fujian Dali's tax filings with the SAT and SAIC has no factual basis.

In addition, the Company notes that in its interview with Bloomberg, FG Alpha Management again raised doubts about the Group's relatively low operating expenses. While the Company addressed such allegations in its Clarification Announcement, it would like to emphasize that the Group's low operating expenses are the direct result of its business model. The Group sells its products to distributors at lower ex-factory prices, and in return the distributors take up a large portion of the selling and distribution expenses for the products. This business model enables the Group to achieve a comparable or higher operating profit margin compared with its industry peers while its gross profit may be slightly lower than theirs. The Group believes that this distributor business model (which is by no means rare in the industry) provides better incentives to distributors to sell the Group's products. As a result, the Group's products have high coverage of sales channels, particularly traditional channels. At the same time, in the beverage segment, the Group has adopted a sales model similar to that of some multi-national beverage companies in response to the demands of the products and the market. As a result, the financial indicators in this segment are similar to those of comparable companies.

As demonstrated above, FG Alpha Management questioned the financial condition of the Group based on a single financial indicator (operating expenses as a percentage of revenue), which showed its strong bias and lack of basic analysis of the Group's business model. In comparing the Group and its industry peers, FG Alpha Management did not adequately consider the similarities and differences between them, and, as a result, its conclusions are worthless and intentionally misleading. The Board believes that the allegations in the Slides are made without regard to basic facts, which demonstrates that FG Alpha Management was more than unprofessional and careless in creating such misleading allegations.

The Slides disclosed that FG Alpha Management has a net short interest with respect to the securities of the Company and therefore may realize significant gains in the event that the price of the Shares declines. The Board would like to emphasize that shareholders of the Company and potential investors should exercise extreme caution in reading the Slides and the allegations therein in light of the significant gains FG Alpha Management stands to realize. The Board and senior management of the Company had not been contacted nor interviewed by FG Alpha Management, Dan David or GeoInvesting to verify any information mentioned in the Slides. To protect the Company's interest against these serious, groundless, false or misleading allegations, the Company reserves the right to take all necessary steps or actions, including without limitation, instituting such legal proceedings against such entity and/or associated individual(s) responsible for the Slides and reporting to the relevant law enforcement authorities for investigation and prosecution.

The Board believed that regarding the Allegations in the Slides, FG Alpha Management had

1. intentionally used biased information from various websites, not operated or unauthorized by the Company;

2. purposely erroneously used public information and filings to support its allegations and created confusions on certain information of the Group.

Shareholders of the Company and potential investors are therefore reminded to exercise caution when dealing in the securities of the Company.

Hong Kong, 8 June 2017

By order of the Board

Dali Foods Group Company Limited

達利食品集團有限公司

Xu Shihui

Chairman

As at the date of this announcement, the directors of the Company are Mr. XU Shihui, Mr. ZHUANG Weiqiang and Ms. XU Yangyang being the executive directors; Ms. XU Biying and Ms. HU Xiaoling being the non-executive directors; Mr. CHENG Hanchuan, Mr. LIU Xiaobin and Dr. LIN Zhijun being the independent non-executive directors.